What Explains Herd Behavior in the Chinese Stock Market?

Chong, Terence Tai Leung; Liu, Xiaojin; Zhu, Chenqi

doi:10.1080/15427560.2017.1365365

Cited by 51 publications

(20 citation statements)

References 22 publications

(10 reference statements)

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“…For this reason, "the nonlinear market return R2m,t is included in the test equation, and the significant negative coefficient γ3 in the empirical test will be consistent with the occurrence of herd behavior." [4].…”

Section: Ch Model and Cck Modelmentioning

confidence: 99%

“…This paper is motivated by the following reasons. First, though we have research literature that includes (Chong et al [4]; Demirer and Kutan [5]; Tan et al [6]) targeted at the Chinese market, their research orientations are slightly different and their conclusions are various. Therefore, it is vital to make a summarization for the convenience of future studies.…”

Section: Introductionmentioning

confidence: 99%

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The Impact of Herd Behavior on the Chinese Stock Market

Lei¹

2022

Advances in Social Science, Education and Humanities Research

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Herd behavior refers to an individual who is influenced by the behavior of the outside crowd, and shows his own perception, judgment, and cognition opinion or the behavior of the majority of people. In behavioral finance, herding is always used to describe similar investment choices due to mutual influence among investors. It happens at the same time with market volatility, which exists in both up and down markets. This article investigates the existence of herd behavior in the Chinese stock market and the impact of herd behavior in the Chinese finance market. Concluding the studies that make use of the nonlinear model of Christie and Huang (CH Model) and Chang, Cheng, and Khorana (CCK model). Evidence of herding is found in Chinese stock market. It is shown that herding is influencing Chinese stock market for decades from both sides.

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Section: Ch Model and Cck Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The Impact of Herd Behavior on the Chinese Stock Market

Lei¹

2022

Advances in Social Science, Education and Humanities Research

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“…Herding was investigated in the Spanish stock market ( Ahmed et al, 2015 ) after, during, and before the global financial crisis of 2008 by utilising the above-discussed measures. Herd behaviour was also highlighted in China’s up and down stock market through CSAD method ( Chong et al, 2016 ). Herding was attributed to risk factors; short-term investment aptitude of the investors, and analyst recommendation, but it was not related to the firm’s size.…”

Section: Literature Reviewmentioning

confidence: 99%

Herd Behaviour, Fundamental, and Macroeconomic Variables – The Driving Forces of Stock Returns: A Panel-Based Pooled Mean Group Approach

2022

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The existing research aims to seek the herding effects on stock returns at the industry level in Pakistan Stock Exchange (PSX). Moreover, the relationship between stock returns and herding has been studied by taking some macroeconomic (exchange rate, interest rate, and inflation rate) and fundamental (return on equity and earnings per share) control variables. Herding is actually imitating other’s behaviour. This phenomenon indicates a situation where the investors follow the crowed and ignores their personal information, despite knowing the correctness of their information. Herd behaviour may drive from fundamental factors leading to efficient markets. However, it may not be associated with fundamental information causing unstable prices. The stock price data of PSX listed companies from 1999 to 2017 have been the point of focus. The underlying herding measure was the cross-sectional absolute deviation (CSAD), proposed by Chang et al. (2000). The significant analysis technique facilitating the current research is pooled mean group (PMG)/panel autoregressive distributed lag (ARDL) approach. Findings revealed that some sectors are evident for positive effect of herding on stock returns, whereas some others are witnessed for its negative effects on stock returns, in both long run and short run. As far as the control variables are concerned, they demonstrated both significant and insignificant effects on stock returns in different sectors of PSX. The study has important implications for policymakers.

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“…In the Indian Market, herding behavior also had no association with trading volume. The reasons for herd behavior existing in the Chinese Stock Market, in both up and down states, are analyst forecast, short-term investor horizon, and inclusion of risk in decision making [40].…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Does Herding Bias Drive the Firm Value? Evidence from the Chinese Equity Market

et al. 2019

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Equity markets play a pivotal role in the sustainability of developing countries, such as China. The literature on the detection of herding biases is confined to the aggregate level (firms, sector/industry and market). The present study adds to the behavioral finance literature by addressing the surprisingly unnoticed phenomena of the behavioral impact of herding bias on firm value (FV) at the firm level, using the sample of A-Shares listed firms at the Shanghai and Shenzhen Stock Exchanges (SSE and SZSE) under panel fixed effect specification. Initially, we detect the existence of investors and managers herding (IHR and MHR) biases at firm-level, and later, we examine their impact (distinct and interactive) upon the FV. The empirical results document the presence of IHR and MHR bias at market, sector and firm-level in both equity markets, which potentially drive the FV, while the impact is more pronounced during the extreme trading period. The findings are robust under different time intervals, and industry classification, therefore, offers useful policy implications to understand the behavioral dynamics of investors and managers.

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What Explains Herd Behavior in the Chinese Stock Market?

Cited by 51 publications

References 22 publications

The Impact of Herd Behavior on the Chinese Stock Market

The Impact of Herd Behavior on the Chinese Stock Market

Herd Behaviour, Fundamental, and Macroeconomic Variables – The Driving Forces of Stock Returns: A Panel-Based Pooled Mean Group Approach

Does Herding Bias Drive the Firm Value? Evidence from the Chinese Equity Market

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